So far this year, the NASDAQ Composite Index has outperformed the other large-cap averages, and this is a positive indicator.

At the beginning of last year, blue chips shot out of the gate with uncommon capital gains, and as confidence in the rally grew, investors slowly felt more comfortable with more speculative issues, which are often listed on the NASDAQ.

After a pronounced consolidation during the summer of last year, large-cap NASDAQ stocks, like Microsoft Corporation (MSFT), Juniper Networks, Inc. (JNPR), and even Intel Corporation (INTC), reaccelerated.

I view the price reacceleration in large-cap technology stocks as a combination of attractive valuations and yields and improved expectations for growth. Microsoft’s fourth-quarter sales are expected to grow some 10%.

While blue-chip strength is always helpful, large-cap technology stocks must be a big part of the long-term trend, as they are such a large part of the daily economy now.

The Russell 2000 Index of small-caps is also holding up extremely well and is another positive indicator for the broader market. While stocks are very much in need of a correction, it won’t happen without a major catalyst, and trading action among large-cap technology and small-caps is reason enough to expect more capital gains. The chart of the Russell 2000 Small Cap Index is featured below:

Chart courtesy of www.StockCharts.com

Also not to be forgotten is the Dow Jones Transportation Average, which is still just a hair off its all-time record-high. Transportation stocks are always a leading indicator, and if you attribute any worth to the performance of airline stocks, their year-to-date performance is also a positive signal.

Given current information, a major retrenchment in the stock market would be a buying opportunity. With this in mind, the U.S. economy can experience its next technical recession within the context of a secular bull market. This is entirely possible this year.

But the positive dynamics for equities remain intact. Low short-term interest rates are a certainty this year. The health of U.S. corporations, especially brand-name large-caps, is extremely good and at a minimum; earnings maintenance is a high likelihood, as higher prices have demonstrated not to adversely affect demand.

And finally, while there has been frothy initial public offering (IPO) trading, countless blue chips are not expensively priced. Their stocks might be at all-time record-highs on slow prospects for growth, but valuations aren’t out of their norms yet for many of these companies. (See “If You Don’t Want to Leave This Market, Stick with These Proven Winners.”)

So, my 2014 outlook for equities is still positive given current data, especially if corporations can meet or beat consensus in the first half of the year.

Stocks are due for a correction, but technically, I don’t see it happening with the current relative price strength from the NASDAQ, Russell 2000, and transportation stocks.

I wouldn’t chase after any position in this market, and that goes for yields as well. But with corporate balance sheets in such strong shape and the cost of money being so cheap, increased dividends and share buybacks once again bode well for blue-chip stocks.

Why the NASDAQ Will Outperform the Other Major Indices in 2014

By Mitchell Clark, B.Comm. Published : January 14, 2014

So far this year, the NASDAQ Composite Index has outperformed the other large-cap averages, and this is a positive indicator.

At the beginning of last year, blue chips shot out of the gate with uncommon capital gains, and as confidence in the rally grew, investors slowly felt more comfortable with more speculative issues, which are often listed on the NASDAQ.

After a pronounced consolidation during the summer of last year, large-cap NASDAQ stocks, like Microsoft Corporation (MSFT), Juniper Networks, Inc. (JNPR), and even Intel Corporation (INTC), reaccelerated.

I view the price reacceleration in large-cap technology stocks as a combination of attractive valuations and yields and improved expectations for growth. Microsoft’s fourth-quarter sales are expected to grow some 10%.

While blue-chip strength is always helpful, large-cap technology stocks must be a big part of the long-term trend, as they are such a large part of the daily economy now.

The Russell 2000 Index of small-caps is also holding up extremely well and is another positive indicator for the broader market. While stocks are very much in need of a correction, it won’t happen without a major catalyst, and trading action among large-cap technology and small-caps is reason enough to expect more capital gains. The chart of the Russell 2000 Small Cap Index is featured below:

Chart courtesy of www.StockCharts.com

Also not to be forgotten is the Dow Jones Transportation Average, which is still just a hair off its all-time record-high. Transportation stocks are always a leading indicator, and if you attribute any worth to the performance of airline stocks, their year-to-date performance is also a positive signal.

Given current information, a major retrenchment in the stock market would be a buying opportunity. With this in mind, the U.S. economy can experience its next technical recession within the context of a secular bull market. This is entirely possible this year.

But the positive dynamics for equities remain intact. Low short-term interest rates are a certainty this year. The health of U.S. corporations, especially brand-name large-caps, is extremely good and at a minimum; earnings maintenance is a high likelihood, as higher prices have demonstrated not to adversely affect demand.

And finally, while there has been frothy initial public offering (IPO) trading, countless blue chips are not expensively priced. Their stocks might be at all-time record-highs on slow prospects for growth, but valuations aren’t out of their norms yet for many of these companies. (See “If You Don’t Want to Leave This Market, Stick with These Proven Winners.”)

So, my 2014 outlook for equities is still positive given current data, especially if corporations can meet or beat consensus in the first half of the year.

Stocks are due for a correction, but technically, I don’t see it happening with the current relative price strength from the NASDAQ, Russell 2000, and transportation stocks.

I wouldn’t chase after any position in this market, and that goes for yields as well. But with corporate balance sheets in such strong shape and the cost of money being so cheap, increased dividends and share buybacks once again bode well for blue-chip stocks.

Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners.